How OTT Companies Can Thrive in Latin America
Latin America is one of the fastest-growing over-the-top (OTT) marketplaces in the world.
65% of adults in the region now have an internet connection, and OTT media consumption is quickly becoming the primary reason they use it. Over the next five years, OTT revenues are predicted to triple, according to an independent study by Digital TV Research.
However, despite this market’s potential, OTT success in Latin America requires a unique approach.
Companies can’t simply take models that work elsewhere and slap Spanish or Portuguese subtitles on them and expect success. Nor is it possible to take a solution that works in one Latin American country and assume it will work in another.
Instead, here are some best practices for OTT providers seeking success in Latin America:
Aim for a quality mobile experience
In Latin America, nine out of 10 people connected to the internet have smartphones, and often that smartphone is their primary internet device. That means the way that Latin American customers access the internet looks very different than the way North American customers do. For example, in the United States, smartphone users normally shop on their device but then complete the purchase on a desktop computer, according to Gallup. That makes sense in that country, where smartphone penetration still hasn’t surpassed desktop use per household.
That assumption goes out the window when it comes to a Latin American audience, though; 66 percent of smartphone users in Latin America have made a purchase from their smartphone in the last six months. In this region, customers search, shop and watch full-length movies — all via smartphone. That means the mobile experience has to be of the highest quality; in fact, in Latin America, it’s even more of a priority than ensuring the customer gets a passable desktop experience.
To achieve quality, companies offering OTT services have to address modern smartphone capabilities and also regional broadband internet capabilities. In 2016, fewer than 60% of Mexican providers and fewer than 30% of Brazilian providersoffered a connection faster than 4 mbps. But this is abruptly shifting as internet service providers build out infrastructure. Considering the region’s extremely quick growth projections, OTT providers will need to build in the capabilities for HD viewing even before internet service providers offer streaming on that level, because customers won’t be happy with the base level of streaming quality for very long.
Look for niche, regional offerings
With the subscription VOD market in LATAM projected to grow to $651 million by 2021, it’s no surprise that local players are popping up to compete with OTT giants for a slice of the pie. In Mexico, mass media company Televisa launched its own SVOD service last year, Blim; in Argentina, Cablevision Flow, a TVE and OTT service, was launched; in Brazil, TV network Globo and leading pay-TV service Globosat have launched OTT platforms too.
While Latin America is full of potential as a whole, customer demands differ powerfully from region to region. In Mexico, Blim recently commissioned “The Last Dragon,” a drama about a white-collar drug dealer, similar to “Breaking Bad.” Meanwhile Argentina, famed for its opera houses, could be fertile ground for an OTT service that streams theatrical productions. In fact, consumers crave local content all over Latin America, especially regional telenovelas, as Vindicia observes.
The most visible niche market success story of Latin America to date is ESPN Play. ESPN offers regional sports game streaming in three languages (Spanish, Portuguese and English) and enjoys the largest cut of the OTT sports audience. Since ESPN Play customizes its offerings by language and country, what customers are getting shifts from region to region — which fits the ticket for the variable demands of audiences in Latin America.
Consider hybrid monetization models
Payment was once perceived as a major barrier when it came to penetrating the Latin American OTT market, as credit card penetration in the region remains low. In recent years, however, companies have devised clever workarounds to thrive in a cash-based economy — for instance, by accepting coded vouchers that users can buy with cash at their local bank or affiliated agents. But hurdles still remain. Indicating how niche and variable the area can be, a gift card is considered an attractive substitute for online payments in Mexico, but not in Brazil.
That’s why it’s important that companies continue refining hybrid monetization models and that they be able to pivot. At Verizon Digital Media Services, our customers — leading content creators and publishers around the world — can add a small parameter at the end of a video URL to include or remove advertising embedded into the videos. This selection gives content providers the option of offering the OTT TV catalog for free, but with display advertising, or for pay with no ads. Other hybrid models can also be deployed, with pay-per-view, also known as transactional video on-demand (TVOD), offered alongside the option to view the same content with ads for free. Simply removing the URL parameter can help a company quickly switch to another advertising model.
Already, it’s clear that OTT provider competition in Latin America is going to be fierce. Companies will compete to see who has the most convenient mobile platform, the highest-quality user experience, the most desirable niche content and the most adaptable business model as rapid growth overtakes the region. As of yet, there’s no one solution for how to target Latin American consumers, but that diversity is precisely what companies must keep in mind as they expand in the region. As the area’s OTT TV consumption quadruples in the next decade, those who adopt these best practices while remaining nimble are going to win big.